Feb 062013

By Nick Worth
The sale of the former paper mill in Snowflake was finalized Jan. 30 as Hackman Capital Partners, in partnership with the Aztec Land and Cattle Company, purchased the Snowflake holdings of the Catalyst pa-per Company.
Included in the sale were the abandoned mill buildings, 19,000 acres of land and, most importantly, the Apache Railway Company.
Hackman Capital Partners is a Los Angeles-based real estate investment firm that, according to its web-site, “focuses on the acquisition of industrial real estate, and the purchase and sale of industrial equipment.”
The firm currently has “over 100 facilities throughout the United States, totaling approximately 18 million square feet and over 1,300 acres of developable land.” The acreage of land held by the firm has risen with the purchase of the Catalyst property.
The Aztec Land and Cattle Company is well known in the area with extensive land holdings in Navajo County. Aztec President Stephen M. Brophy was active in the effort to save the Apache Railway from scrappers.
Catalyst ceased operations at the paper mill in September 2012, laid off more than 300 employees and had removed all the paper-making machinery from the site before putting the property up for auction in a court-ordered bankruptcy sale.
According to a press release from Aztec Land and Cattle Company, “Of the 22 bidders in the paper mill bankruptcy, Hackman was the only one who made an effort to reach out to local leaders, to understand local interests and to address local concerns.”
One of those concerns was keeping the Apache Railway running as a viable, operating railroad. Every indication was that the 100-year-old short line was a target for scrappers, who wanted to tear up the rails and sell the steel.
Because the railroad was seen as absolutely vital to the economic future of the Town of Snowflake and Navajo County, Snowflake Mayor Kelly Willis and his council began the process to condemn the railroad in order to prevent its destruction.
According to the press release, Hackman understood the importance of the railroad to the future of the community and so made the decision not to scrap the line.
The result is, the Apache Railway is now owned by The Snowflake Community Foundation, Inc., an Arizona non-profit corporation, which has purchased the stock of railway. The foundation will be seeking funding from state government sources for the purchase.
“The foundation merely owns the stock of the Apache Railway,” said David Brown of Brown and Brown Law Offices in St. Johns. “They had to incur debt to do so and they need to retire that debt as soon as possible.”
Brown said details of the debt incurred will be made public, but are not yet available, as the sale only finalized last week.
As far as seeking funding from government sources, Brophy said there is a good possibility funding can be obtained through the Railroad Infrastructure Fund (RRIF).
“It’s a revolving pool of money that the federal government established a long time ago that is meant for short line railroads and could be used for long term financing,” said Brophy. “With the Apache Railway, 99 percent of its purpose was to serve the paper mill.”
He said the railroad never had to seek out new customers, but that now, with the closing of the mill, it is a major driver of future economic development in the area.
“The Apache Railway needed a new owner and a new life,” Brophy said. “The foundation borrowed money to ensure that.”
The day-to-day operations of the short line will continue to be run by the railroad’s existing manager, Shirley Cornett, and the same crew of employees who have been running the railroad for many years.
More than just the railroad was at stake, however, as Snowflake Power, which employs about 60 people, was in jeopardy after the mill shutdown. Snowflake Power depended on the paper mill for water and other services, which included some fuel for its biomass power boiler.
Brophy said local Arizona Public Service (APS) manager Steve Quinn has been working hard to help Snowflake Power. He said Quinn, along with APS management in Phoenix, has been working with Hackman and community leaders to do what is necessary to assist Snowflake Power in restoring its future.
“This is an incredible accomplishment, but we still have a long way to go,” said Brown. “We’re still looking for a lot of help.”
“This is a major, major accomplishment,” said Brophy. “We’ve crossed a big hurdle and it’s a great day for Navajo County.”